Re Li Ye
Read the full judgment text of HCB 5271/2017 on BabelCite. This HCB judgment was delivered on 29 April 2020.
1. This is an application of Madam Li Ye (“Madam Li”) to annul the bankruptcy order made against her on 1 November 2017 (the “Bankruptcy Order”) relying on section 33(1)(a) of the Bankruptcy Ordinance (Cap 6) (the “Ordinance”).
Cites 22 cases
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HCB 5271/2017 [2020] HKCFI 636 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE IN BANKRUPTCY PROCEEDINGS NO 5271 OF 2017 ________________________
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_________________________________ JUDGMENT _________________________________ Introduction 1.This is an application of Madam Li Ye (“Madam Li”) to annul the bankruptcy order made against her on 1 November 2017 (the “Bankruptcy Order”) relying on section 33(1)(a) of the Bankruptcy Ordinance (Cap 6) (the “Ordinance”). 2.Unless otherwise stated, the page numbers in brackets in this judgment are page numbers of the document hearing bundles B (“Bundles B”). Procedural history 3.On 27 September 2016, the Petitioner commenced HCMP 2586/2016 (the “HCMP Action”) against Gold China Industries Limited (“Gold China”), Win Time Limited (“Win Time”), Yuen Yui Hing (“Mr Yuen”) and Madam Li. In the HCMP Action, the Petitioner claimed against Madam Li under two guarantees dated 5 March 2010 (the “2010 Guarantee”) and 25 July 2014 (the “2014 Guarantee”) (together the “Guarantees”) securing the indebtedness of Gold China. The Petitioner claimed HK$21,666,826.26 and US$568,682.01 together with further interest against Madam Li and other defendants. The Petitioner claimed a further sum of HK$3,695,957.46 with further interest against Mr Yuen in the HCMP Action which did not concern Madam Li. 4.On 13 October 2016, Katherine Y W Or & Co (“KYWO”) filed acknowledgment of service of originating summons for all the defendants (including Madam Li) in the HCMP Action. 5.By an order by consent dated 20 April 2017 in the HCMP Action, it was ordered that the Petitioner did recover from the defendants (including Madam Li) jointly and severally the sums of HK$22,409,611.10 and US$231,925.49 together with further interest from 3 March 2017 until payment and costs in the sum of HK$31,750.00 (the “Consent Order”). 6.On 14 May 2018, Cheung & Co filed notice of change of solicitors to represent Madam Li in the HCMP Action. 7.On 26 May 2017, the Petitioner through its solicitors issued a statutory demand (the “SD”) to Madam Li demanding payment of the sums of HK$22,875,273.13 and US$235,911.89. The Petitioner put the following addresses in the SD as the addresses of Madam Li:
The Addresses 8.As the Petitioner had attempted service of the SD and the bankruptcy petition to Madam Li at the aforesaid three addresses, I shall put them into proper context. 9.There are three companies which have been referred to by the parties in this case. They are Gold China, Win Time and a company called “HK Bella Vita International Fashion Company Limited” (“Bella Vita”). 10.Madam Li was a director of Gold China from 13 January 2003 until 17 August 2016 (pp 109 to 114). As at 22 October 2003, Madam Li and Win Time were the only directors and shareholders of Gold China with Madam Li holding 1,999,999 shares and Win Time holding 1 share (pp 123 to 128). Win Time was basically a company wholly owned by Madam Li until about 1 May 2014. (See para 18 below) Gold China increased its issued share capital from $2,000,000 to become $5,000,000 on 6 January 2005. All the newly issued capital was issued to Madam Li (pp 213 to 216). As such, Madam Li held 4,999,999 shares in Gold China as at 22 October 2005 whereas Win Time still held 1 share (pp 129 to 146). 11.Gold China moved its registered office to the Hung To Road Address on 22 October 2006 (p 217). Madam Li reported change of her residential address as director of Gold China from a PRC address to the Latin Court Address with effect from 21 October 2013 (pp 219 to 221). Gold China moved its registered office away from the Hung To Road Address to another address at Shing Yip Street and increased its issued capital to $10,300,000 between 22 October 2014 and 22 October 2015. The newly issued capital was issued to Mr Yuen on 22 April 2015. As such, the shareholding of Madam Li in Gold China was diluted from 99.99% to became 48.54% from 22 April 2015 onwards. Mr Yuen became the majority shareholder holding 51.45% of Gold China’s issued capital. Mr Yuen was also appointed as a further director of Gold China on a day between 22 October 2014 and 22 October 2015 (pp 25 to 41). Madam Li remained as a director of Gold China until 17 August 2016. Thereafter she only remained as a shareholder of Gold China holding 48.54% of its issued capital. Her address in the shareholders’ register remained at the Latin Court Address as at 22 October 2016 (ie the reporting date of the 2016 annual return of Gold China). The Latin Court Address was also the address of Mr Yuen reported in Gold China’s annual returns up to the year of 2016 (pp 42 to 49). The annual returns of Gold China after 2016 were not produced to this court. As such, I do not know whether there had been any changes on the addresses of Madam Li and Mr Yuen in the statutory records of Gold China after 22 October 2016. 12.From the statutory records filed with the Companies Registry it can be seen that the Hung To Road Address had been the registered office address of Gold China from 22 October 2006 to a date between 22 October 2014 and 22 October 2015. 13.Madam Li had been a director of Gold China from13 January 2003 until 17 August 2016. The Latin Court Address was Madam Li’s reported residential address as director of Gold China from 21 October 2013 to at least 22 October 2015 (ie the reporting date of the 2015 annual return of Gold China). 14.Madam Li has been a shareholder of Gold China latest from 22 October 2003 (ie the reporting date of the 2003 annual return of Gold China) onwards. Madam Li was the majority shareholder of Gold China holding 99.99% of its issued share capital until 22 April 2015. She still held a substantial shareholding of 48.54% in Gold China thereafter. The Latin Court Address had been the address of Madam Li as a shareholder kept in the statutory records of Gold China from between 22 October 2012 and 22 October 2013 to at least 22 October 2016 (ie the reporting date of the 2016 annual return of Gold China). 15.According to the statutory records filed by Gold China (many of them signed by Madam Li), prima facie, the residential address of Madam Li from 21 October 2013 up to at least 22 October 2016 was at the Latin Court Address. 16.Madam Li was a director of Win Time from 25 August 2003 until 2 May 2014. She was also the sole director of Win Time as at 9 October 2013 with reported residential address at the Latin Court Address. Mr Yuen was appointed as a director of Win Time on 2 May 2014 and became the sole director of Win Time thereafter up to at least 9 October 2016 (ie the reporting date of the 2016 annual return of Win Time) (pp 50 to 81 and 115 to 122). Mr Yuen’s reported residential address was also the Latin Court Address. 17.The How Ming Street Address was the registered office address of Win Time latest since 9 October 2003 (ie the reporting date of the 2003 annual return of Win Time) to at least 9 October 2016 (ie the reporting date of the 2016 annual return of Win Time). 18.Madam Li had been a shareholder of Win Time since 25 August 2003 holding 90% of its issued capital. The other shareholder was Gold China. Gold China was basically a company wholly owned by Madam Li until about 1 May 2014 when Mr Yuen became the majority shareholder of Win Time which held a nominal one share in Gold China. (See paras 10 to 11 above) As at 9 October 2003, Madam Li and Gold China were the only directors of Win Time (pp 458 to 463). Madam Li became the sole shareholder of Win Time on 20 May 2005 when Gold China transferred all its shareholding in Win Time to Madam Li. She also became the sole director of Win Time (pp 473 to 481). Madam Li was holding 10 shares of Win Time being all the issued capital of Win Time at that time. The corporate structure of Win Time remained unchanged until 1 May 2014 when 499,990 shares of Win Time were allotted to Mr Yuen making him the majority shareholder of Win Time (pp 552 to 555). Madam Li still kept her 10 shares in Win Time. The shareholding structure of Win Time remained unchanged at least up to 9 October 2016 (ie the reporting date of the 2016 annual return of Win Time). 19.Madam Li reported her residential address at the Latin Court Address with effect from 10 July 2013 as a director of Win Time (pp 549 to 551) Madam Li remained as a shareholder of Win Time even after ceasing as a director of the company. Her address kept in the shareholders’ register of Win Time (at least from 9 October 2013 to 9 October 2016) was the Latin Court Address. As in the case of Gold China, annual returns of Win Time after 2016 were not produced to this court and I have no information on whether there had been any changes in the reported address of Madam Li in the statutory records of Win Time after 9 October 2016. 20.According to the statutory records filed by Win Time (many of them signed by Madam Li), prima facie, the residential address of Madam Li (at least from 10 July 2013 to 9 October 2016) was at the Latin Court Address and the How Ming Street Address was the registered office address of Win Time at least from 9 October 2003 to 9 October 2016. 21.Madam Li was the sole shareholder of Bella Vita as at 28 September 2013 (ie the reporting date of the 2013 annual return of Bella Vita) when Madam Li and Mr Yuen were directors of Bella Vita (pp 82 to 91). The corporate structure of Bella Vita remained unchanged at least up to 28 September 2015 (ie the reporting date of the 2015 annual return of Bella Vita) (pp 100 to 108). 22.Madam Li reported the Hung To Road Address as her residential address in the 2013 and 2014 annual returns of Bella Vita. She reported the Latin Court Address as her residential address in the 2015 annual return of Bella Vita (pp 100 to 108). 23.The statutory records of Bella Vita showed that as at 28 September 2015 (ie the reporting date of the 2015 annual return of Bella Vita), the residential address of Madam Li was at the Latin Court Address. Annual returns of Bella Vita after 2015 were not produced to this court. As such, I do not know whether there were any reported changes of Madam Li’s address in the statutory records of Bella Vita after 28 September 2015. 24.To summarize, the Latin Court Address was the reported residential address of Madam Li from 21 October 2013 to at least 22 October 2016. In fact, the Latin Court Address property was purchased by Madam Li on 15 September 2009 (pp 760 to 768). It was sold on 26 July 2016 (pp 773 to 782). In the assignment selling the Latin Court Address, Madam Li provided an address at Ngau Tau Kok as her address. 25.The How Ming Street Address was the registered office address of Win Time at least from 9 October 2013 to 9 October 2016. 26.The Hung To Road Address was the registered office address of Gold China from 22 October 2006 to between 22 October 2014 and 22 October 2015. It was also the residential address of Madam Li as at 28 September 2013 and 28 September 2014 reported in the annual returns of Bella Vita as well as the address of Madam Li stated in the 2010 Guarantee and the 2014 Guarantee. No evidence has been adduced to suggest that Madam Li had informed the Petitioner of any changes of her address in the Guarantees. In fact, the Hung To Road Address was a property purchased by Win Time on 30 December 2005 and the assignment was executed by Madam Li for Win Time as purchaser (pp 556 to 566). 27.Madam Li contends that all the companies (ie Gold China, Win Time and Bella Vita) were formed by Mr Yuen and she had no knowledge of their corporate structures. (See para 23 of Li’s 1st Affirmation and para 19 of Li’s 2nd Affirmation) However, many of the corporate documents of these companies filed with the Companies Registry were signed by Madam Li. Even if Madam Li’s bare assertion is accepted, it is not Madam Li’s case that Mr Yuen, being the husband of Madam Li, did not know the residential address of his wife (ie Madam Li) in 2014, 2015 and 2016. Service of the SD at the Latin Court Address 28.When the process server of the Petitioner’s solicitors attempted service of the SD to Madam Li at the Latin Court Address in June 2017, he was informed by a female adult through intercom of the Latin Court Address that there was no such person known as Madam Li living at the Latin Court Address. The said female adult and the caretaker of Latin Court told the process server that they did not know the whereabouts of Madam Li and did not have any means of contact of Madam Li. The caretaker of Latin Court told the process server that Madam Li had moved out from the Latin Court Address for more than three years. 29.Appointment letter dated 8 June 2017 for serving the SD sent to the Latin Court Address was returned by the Hongkong Post through the dead letter service and marked “moved, redirection service not arranged by addressee”. Service of the SD at the How Ming Street Address 30.When the process server attempted service of the SD to Madam Li in May and June 2017 at the How Ming Street Address, he found that “unit 2B” had been sub-divided into eight units, namely units 2B1 to 2B8. The process server was told by occupants of unit 2B2, unit 2B6 and other neighbouring units at the same floor and the caretaker of Good Year Industrial Building that they did not know the whereabouts of Madam Li and did not have any means of contact of Madam Li. 31.Appointment letter dated 5 June 2017 for serving the SD sent to the How Ming Street Address had not been returned by the Hongkong Post. Service of the SD at the Hung To Road Address 32.When the process server attempted service of the SD to Madam Li at the Hung To Road Address in June 2017, he found that there was no “Flat 3B” at the Ground Floor of the Hung To Road Address. “Flat 3” at the Ground Floor of the Hung To Road Address was found to be occupied by a business called “Chef Hat Café”. The process server was told by a male adult at the cashier of the said business, a female adult in Flat 4 of the Ground Floor, a male adult in Flat 6 of the Ground Floor and the caretaker of Century Centre that they did not know “Flat 3B”. They further told the process server that they did not know the whereabouts of Madam Li and did not have any means of contact of Madam Li. 33.Appointment letter dated 6 June 2017 for serving the SD sent to the Hung To Road Address had not been returned by the Hongkong Post. 34.After the aforesaid unsuccessful attempts of personal service of the SD to Madam Li, the Petitioner’s solicitors advertised the SD on 19 June 2017 in a Chinese newspaper circulating in Hong Kong. 35.Bankruptcy petition against Madam Li (the “Petition”) was issued on 29 August 2017. Service of the Petition 36.Attempted personal service of the Petition on Madam Li at the Latin Court Address, the How Ming Street Address and the Hung To Road Street in August and September 2017 were also unsuccessful. The process server encountered similar difficulties as when he was attempting service of the SD to Madam Li at these addresses. 37.The appointment letter dated 5 September 2017 for serving the Petition sent to the Latin Court Address was returned by the Hongkong Post and marked “Addressee unknown” whereas the appointment letters also dated 5 September 2017 sent to the How Ming Street Address and the Hung To Road Address had not been returned. 38.On 28 September 2017, the court granted an order for substituted service of the Petition on Madam Li by ordinary post to the aforesaid three addresses and by advertising in a Chinese newspaper circulating in Hong Kong (the “Sub-Service Order”). Service of the Petition to Madam Li was effected by ordinary post and newspaper advertisement on 4 October 2017 pursuant to the Sub-Service Order. 39.Madam Li did not attend the hearing of the Petition scheduled for 1 November 2017 and the Bankruptcy Order against her was granted. The annulment application 40.On 5 June 2018, Madam Li took out this application to annul the Bankruptcy Order under section 33(1)(a) of the Ordinance (the “Application”). 41.Madam Li filed her first affirmation on 8 June 2018 (“Li’s 1st Affirmation”) in support of the Application. 42.On 8 November 2018, the Petitioner took out a summons (“P’s Summons”) requiring the trustees-in-bankruptcy of Madam Li (the “Trustees”) to file and serve an affidavit on the financial position of Madam Li as at the date of the Bankruptcy Order and the ability of Madam Li to settle all undisputed liabilities as at that day. P’s Summons also asked the Trustees to file and serve affidavit evidence on matters which in the Trustees’ view would assist the court in determining the Application. 43.The Petitioner filed both affirmation of Sin Shu Kai (“Sin”) (“Sin’s Affirmation”) and affidavit of Tang Lai Shan (“Tang”) (“Tang’s Affidavit”) herein on 7 November 2018 in opposition to the Application and in support of P’s Summons. 44.Madam Li filed her second affirmation on 26 November 2018 (“Li’s 2nd Affirmation) in reply to Sin’s Affirmation and Tang’s Affidavit and in opposition to P’s Summons. 45.By a consent summons filed herein on 4 February 2019, the parties (ie the Petitioner, Madam Li and the Trustees) agreed for the court to grant an order for the Trustees to file and serve affidavit evidence in respect of the financial position of Madam Li (including the assets of Madam Li in Hong Kong and overseas and the liabilities of Madam Li known to the Trustees); and finding(s) of the Trustees’ investigations in respect of the affairs of Madam Li relating to her financial position. An order was granted on 18 February 2019 accordingly. 46.On 10 September 2019, Mr Osman Mohammed Arab of the Trustees filed his third affirmation (the “Trustee’s Affirmation”) pursuant to the aforesaid order of 18 February 2019. 47.Madam Li raised the following three grounds in support of the Application:
48.The Petitioner contends that Madam Li fails to make out any of the aforesaid Grounds. She is unable to demonstrate that “on any grounds existing at the time the [bankruptcy] order was made, the order ought not to have been made”. (Para 7(a) of the skeleton submissions for the Petitioner/Bank) The Petitioner further contends that having regard to the substantial indebtedness continued to be owed by Madam Li, the court should, in any event, not exercise its discretion to annul the Bankruptcy Order. The legal principles 49.Section 33(1)(a) of the Ordinance provides that:
50.In determining an application to annul a bankruptcy order under section 33(1)(a) of the Ordinance, the court shall first see if there were any grounds on which a bankruptcy order ought not to have been made at the material time when it was made, with the applicant bearing the burden of proving the existence of such grounds. Second, even if such grounds existed, the court still has a discretion as to whether to grant an annulment, after carefully considering the interests of the creditor, the debtor and the public, bearing in mind that a bankruptcy order is to be annulled only in exceptional circumstances. (See Kam Hung Cheung v Bank of China (Hong Kong) Ltd [2009] 3 HKLRD 597 at 600-601) 51.The Court of Appeal in the Kam Hung Cheung case (supra) further endorsed the following views of Carlye Chu J (as she then was) expressed in Re Kam Hung Cheung [2008] 5 HKLRD 487 at 492:
The Domicile / Ordinarily Resident Ground 52.Section 4(1) of the Ordinance provides that:
53.In the Petition, the Petitioner relied on the grounds that: “The Debtor is domiciled in Hong Kong and has within 3 years immediately preceding the presentation of this Petition ordinarily resided at Flat A, 9th Floor, Latin Court, 229-231 Prince Edward Road, Kowloon [ie the Latin Court Address], within Hong Kong.” As such, the Petitioner relied on sections 4(1)(a) and 4(1)(c)(i) of the Ordinance to present the Petition. 54.Miss Kwong for Madam Li submits that it is for the Petitioner to prove that the conditions in section 4(1) of the Ordinance have been satisfied. (See para 17 of the Skeleton Submissions of the Bankrupt (“B’s Skeleton”)) This statement is right for hearing of a bankruptcy petition as in Re Liu Yi Fang (unrep, HCB 5613/2013, 26 February 2014) but not quite right for an application to annul a bankruptcy order. The Court of Appeal has pointed out in the Kam Hung Cheung case (supra) that the person applying to annul a bankruptcy order bears the burden of proving that when the order was made there were grounds on which the order ought not to have been made. (See para 11 of the judgment) 55.Miss Kwong contends that Madam Li was not domiciled in Hong Kong when the Petition was presented on 29 August 2017 and that within three years immediately preceding the presentation of the Petition (ie from 30 August 2014 to 29 August 2017 (the “Relevant Period”)), Madam Li had not been ordinarily resident in Hong Kong. The burden of proof is on Madam Li to prove the existence of such ground(s). In Re Wong Lei Kwan Joanne, ex p Bank of China (Hong Kong) Ltd [2009] 3 HKLRD 173 the court annulled a bankruptcy order due to, amongst other things, the bankrupt being found not to be ordinarily resident in Hong Kong in the three years before the presentation of the bankruptcy petition. 56.In Li’s 1st Affirmation, Madam Li stated that she married Mr Yuen in Hong Kong on 1 April 2009 and that:
57.In Li’s 2nd Affirmation, Madam Li stated that:
58.The above are all evidence adduced by Madam Li in respect of the Domicile / Ordinarily Resident Ground. Domicile 59.Madam Li married Mr Yuen, a Hong Kong resident, on 1 April 2009 and moved to live in Hong Kong in September 2009. Madam Li holds a Hong Kong Identity Card and a passport issued by HKSAR (p 1836). In such circumstances, it is likely that Madam Li had acquired Hong Kong domicile prior to 2014. There is no suggestion of the otherwise. The existing domicile of a person is deemed to continue until it is proved that he/she has acquired a new domicile (section 9 of the Domicile Ordinance (Cap 596)) and he/she who asserts a change of domicile bears the burden of proving the truth of the assertion. (See Re Ku Chu Keung (a debtor) [2007] 2 HKLRD 292 and Re張承勷 (unrep., HCB 6679/2015, 16 May 2017)) 60.Miss Kwong relies on paras 24 and 35 of Li’s 1st Affirmation and paras 10 and 11 of Li’s 2nd Affirmation to submit that Madam Li was domiciled in Canada as at 29 August 2017. I have quoted the relevant paragraphs of Madam Li’s affirmation in full in paras 56 and 57 above. 61.In para 24 of Li’s 1st Affirmation, Madam Li stated that she went to Canada on 30 April 2014 until 8 January 2016. She seems to suggest that she was living all the times in Canada from 30 April 2014 until 8 January 2016. However, in para 35 of the same affirmation, Madam Li admitted that she came back to Hong Kong four times from 7 March 2015 to 22 March 2015 and stayed overnight in Hong Kong once. 62.It is noted that the 2014 Guarantee dated 25 July 2014 was executed by Madam Li in the presence of the relationship manager of the Petitioner. (See para 9 of Sin’s Affirmation and para 8(b) of Tang’s affidavit) The aforesaid evidence of Sin and Tang was not disputed by Madam Li in Li’s 2nd Affirmation (being a replying affirmation to the Petitioner’s affirmations in opposition). It is further noted that Madam Li had executed a power of attorney on 24 April 2015 (the “Power of Attorney”) at a solicitors’ firm in Hong Kong (pp 2649 to 2650). It is clear that Madam Li had spent more time in Hong Kong since 30 April 2014 than disclosed in her affirmations. 63.In para 10 of Li’s 2nd Affirmation, Madam Li only stated that she moved to live in Canada in 2014. In para 11 of the same affirmation, Madam Li stated that since the birth of her third child (which was on 23 June 2014 (see para 25(c) of Li’s 1st Affirmation)) she had been staying in Canada except for a few visits to Shenzhen via Hong Kong after January 2016. This is inconsistent with what she had said in para 35 of Li’s 1st Affirmation about her travelling to Hong Kong in 2015 and contradicted by the 2014 Guarantee executed by her on 25 July 2014 and the Power of Attorney executed by her on 24 April 2015. 64.Madam Li does not produce any documentary proof on particulars of her stay in Canada or her stay (or lack of stay) in Hong Kong since 30 April 2014 despite knowing the allegation in Sin’s Affirmation that Mr Yuen had told Sin that Madam Li would only stay in Canada occasionally to look after her children there. No movement records of Madam Li from the Immigration Department since 30 April 2014 have been produced. In fact, no movement or travel records at all of Madam Li have been produced by Madam Li. 65.It is noted that when Madam Li affirmed Li’s 1st Affirmation on 1 June 2018 and Li’s 2nd Affirmation on 20 November 2018, she did not have a permanent address in Canada but stated that she was living temporarily at (暫居於) an address in Toronto. This does not lend support to her assertion that she has been domiciled in Canada and has been ordinarily resident in Canada since 2014. 66.An abandonment or change of domicile is a very serious issue and satisfactory evidence is needed to prove an intention to change a domicile. (See Re Ku Chu Keung (supra)) Madam Li has been domiciled in Hong Kong since 2009. The fact that Madam Li had spent some times in Canada since 2014 is insufficient to change her domicile bearing in mind that her husband, Mr Yuen, was still domiciled in Hong Kong during the material times. The Petitioner presented the Petition against Madam Li on the ground that she was domiciled in Hong Kong. As pointed out in the Kam Hung Cheung case (supra), the burden is on Madam Li to prove that when the Petition was presented against her on 29 August 2017, she was not domiciled in Hong Kong. I find that Madam Li fails to prove on balance of probabilities that she was not domiciled in Hong Kong as at 29 August 2017. I find that the Petitioner is entitled to present the Petition against Madam Li on 29 August 2017 relying on section 4(1)(a) of the Ordinance. Residency 67.The Petitioner also relied on section 4(1)(c)(i) of the Ordinance to petition for the bankruptcy of Madam Li. Section 4(1)(c)(i) of the Ordinance requires the Petitioner to show that Madam Li at any time in the Relevant Period has been ordinarily resident in Hong Kong or has had a place of residence in Hong Kong. Ordinarily resident 68.Madam Li admitted that she lived at the Latin Court Address after she moved to Hong Kong in September 2009. I do not think that she may dispute that she had been ordinarily resident in Hong Kong since then until at least 30 April 2014 when she alleged that she had gone to Canada and had been staying there thereafter. The issue is whether Madam Li had ceased to be ordinarily resident in Hong Kong before the commencement of the Relevant Period on 30 August 2014. As pointed out in paras 61 to 64 above, it is not clear how much time Madam Li had actually stayed in Canada and how much time she had returned to stay in Hong Kong since 30 April 2014. As a person may maintain more than one residence at the same time, even if Madam Li had been a resident of Canada during the Relevant Period, it does not necessarily mean that she was not ordinarily resident in Hong Kong during the same period of time. It is noted that although Madam Li asserted that she had moved to Canada since 30 April 2014, in the 2014 Guarantee dated 25 July 2014 she still put the Hung To Road Address as her address and in the Power of Attorney dated 24 April 2015, she still put the Latin Court Address as her address. As pointed out in paras 10 to 26 above, Madam Li had reported the Hung To Road Address and the Latin Court Address as her residential address to the Registrar of Companies up to at least 22 October 2016. 69.In Re Wong Lei Kwan Joanne (supra) Barma J (as he then was) found the debtor not being ordinarily resident in Hong Kong in the three years before the bankruptcy petition against her was issued. His Lordship set out the basis for the aforesaid finding as follows:
70.Miss Kwong draws analogy between Madam Li’s case and the Wong Lei Kwan Joanne case. I am of the view that the case before me is more similar to the Shum Fong Chung case than the Wong Lei Kwan Joanne case when Madam Li produced no travel records or other documents to back up her bare assertion of non-residence in Hong Kong. 71.In no document signed prior to 1 November 2017 (ie the date of the Bankruptcy Order) adduced by the parties (including documents adduced by Madam Li) a non-Hong Kong address had been stated as Madam Li’s address. Without specific information, such as Madam Li’s movement records in and out of Hong Kong during the Relevant Period, the court is unable to hold that Madam Li had ceased to be ordinarily resident in Hong Kong prior to 30 August 2014. If Madam Li had remained ordinarily resident in Hong Kong “at any time” during the Relevant Period, the requirement of section 4(1)(c)(i) of the Ordinance was fulfilled. The burden is on Madam Li to prove that she had ceased to be ordinarily resident in Hong Kong prior to 30 August 2014. Other than her bare assertion that she was living in Canada most of the time after 30 April 2014, Madam Li adduced no evidence to show that she had ceased to be ordinarily resident in Hong Kong. In fact, she even did not adduce documentary evidence to show that she had left Hong Kong on 30 April 2014. I find that Madam Li has failed to prove on balance of probabilities that she ceased to be ordinarily resident in Hong Kong prior to 30 August 2014. Place of residence 72.Paragraph 4.07 in Butterworths Hong Kong Bankruptcy Law Handbook (6th ed) (2019) states that:
73.The above views were accepted and confirmed by DHCJ Louis Chan (as he then was) in Re Ku Chu Keung (a debtor) (supra) (see para 52 of the judgment). 74.Madam Li stated in Li’s 1st Affirmation that she lived at the Latin Court Address when she moved from China to Hong Kong in 2009. It is noted that the Latin Court Address property was owned by Madam Li since 15 September 2009 and the same was not sold until 26 July 2016 (ie about 13 months prior to the presentation of the Petition). (See para 24 above) As such, Madam Li had had a place of residence in Hong Kong since 2009. 75.In para 35 of Li’s 1st Affirmation, Madam Li admitted that she had stayed for one night in Hong Kong during the period from 7 to 22 March in 2015. She did not state where did she live for that night. As Mr Yuen was living in Hong Kong, probably at the Latin Court Address, it was likely that she was living there during her stay in Hong Kong. 76.The fact that Madam Li might have been residing in Canada after 30 April 2014 does not necessarily mean that she did not have a place of residence in Hong Kong after 30 April 2014. In the circumstances of this case, I am of the view that Madam Li did have a place of residence in Hong Kong during the Relevant Period. The jurisdictional requirement of section 4(1)(c)(i) of the Ordinance for presenting the Petition was fulfilled. 77.I find that Madam Li also fails to prove on balance of probabilities that she did not have had a place of residence in Hong Kong “at any time” during the Relevant Period. Other matters on the Domicile / Ordinarily Resident Ground 78.Miss Kwong refers to para 8(c) of Tang’s Affidavit when Tang pointed out that Madam Li deliberately inserted the registered office address of Gold China (ie the Hung To Road Address) as her address in the Guarantees. Miss Kwong submits that: “In respect of the bankruptcy order obtained against [Madam Li], the Petitioner has made it clear in the bankruptcy petition that it only relies on Section 4(1)(a) and/or Section 4(1)(c)(i) in the presentation of the bankruptcy petition.” “Therefore, notwithstanding the subsequent affirmations seemingly suggesting [Madam Li] to have carry on business in Hong Kong in the 3 years preceding the date of presentation of petition (section 4(1)(c)(ii)), the Petitioner had not made it clear it was relying on section 4(1)(c)(ii) in the presentation of the bankruptcy petition and thus should not be allowed to place reliance on this section for the purposes of the present application.” (Paras 17 and 18 of B’s Skeleton) I agree. 79.Tang pointed out in Tang’s Affidavit that Madam Li put in the Hung To Road Address (being the registered office address of Gold China) in the Guarantees as her address and the Latin Court Address as her residential address in various corporate documents of Gold China, Win Time and Bella Vita up to 2016. This showed that Madam Li was residing in Hong Kong at the material times. The Petitioner does not switch to the section 4(1)(c)(ii) ground as contended by Miss Kwong. Miss Kwong has simply missed the point. 80.The suggestion proposed by Miss Kwong in para 20 of B’s Skeleton that Madam Li put in a Hong Kong address in the Guarantees was done at the request of the bank (ie the Petitioner) or Mr Yuen simply has no basis. It is not supported by any evidence, not even evidence from Madam Li. In any event, if Madam Li had ceased to live in Hong Kong and had already moved to live in Canada at the material times, why would the Petitioner or Mr Yuen request Madam Li to put in an inaccurate address in the Guarantees unless the handling officers of the Petitioner or Mr Yuen had some ulterior motives to defraud or deceive the Petitioner. There is no such suggestion. There is also no suggestion that Madam Li had provided untrue or false information in the Guarantees to defraud or deceive the Petitioner. 81.Miss Kwong submits that the circumstances upon which the Guarantees were signed bears all the hallmarks of a classic case of duress and/or undue influence. This is totally beside the point. Whether the Guarantees were executed under duress or undue influence will be dealt with later in this judgment. However, this has nothing to do with the address of Madam Li at the material times. 82.Tang pointed out in Tang’s Affidavit that in all the annual returns of Gold China and Win Time for the years 2013, 2014, 2015 and 2016, Madam Li put the Latin Court Address as her address and in the annual returns of Belle Vita for the years 2013, 2014 and 2015 Madam Li put either the Hung To Road Address or the Latin Court Address as her address. Miss Kwong contended that Madam Li only needed to put an address but not necessarily her residential address in the annual returns of the companies. This may be right in respect of a shareholder of a company but certainly wrong in respect of a director of the company. It is clearly stated in the annual return form that the address of the director required is the residential address of the director. Madam Li was a director of the aforesaid companies at the material times. Her address stated in the annual returns should be her residential address at the material times. There is no suggestion that Madam Li had provided false or untrue information to the Registrar of Companies. As such, Madam Li held out that she had a residential address in Hong Kong at the material times. This is what section 4(1)(c)(i) of the Ordinance requires (ie at any time in the period of 3 years ending with the day of presentation of the bankruptcy petition, the debtor has had a place of residence in Hong Kong). 83.I find that Madam Li has failed to prove on balance of probabilities that the requirements of sections 4(1)(a) and 4(1)(c)(i) of the Ordinance do not apply to her. Madam Li thus fails on the Domicile / Ordinarily Resident Ground. The Service Ground 84.Miss Kwong relies on Re Chung Sun Kwan [2016] HKCFI 1587 to submit that failure to service the SD properly is a ground for holding that the Bankruptcy Order ought not have been made. 85.Rule 46(2) of the Bankruptcy Rules (Cap 6A) (the “Rules”) provides that:
86.Paras 2.5 and 2.6 of Part I of Practice Direction 3.1 (“PD 3.1”) provides that the following steps taken are considered reasonable steps that should normally be taken by a creditor to discharge his obligation under Rule 46(2) of the Rules in respect of service of a statutory demand:
87.The Petitioner’s solicitors had followed the aforesaid guidance of PD 3.1 in attempting to effect personal service of the SD on Madam Li at all her addresses known to the Petitioner, ie the Latin Court Address, the How Ming Street Address and the Hung To Road Address. Such efforts were set out in the service affirmations (ie Affirmation of Leung Pak Kwan; Affirmation of Wong Sze Shing; and 2nd Affirmation of Leung Pak Kwan) all filed on 29 August 2017 herein. They showed that the reasonable steps required by PD 3.1 had been taken by the Petitioner’s solicitors in attempting personal service of the SD to Madam Li. 88.Miss Kwong takes no issues on compliance with PD 3.1 but contends that the Petitioner had actual knowledge of Madam Li not being in Hong Kong at the material times. Ms Kwong refers to the 2nd Affirmation of Mr Yuen filed and served in the HCMP Action on 19 April 2017 (“Yuen’s HCMP Affirmation”) when Mr Yuen stated that: “The 4th Defendant [ie Madam Li] is my wife and she is always leaving in Canada.” (the “Statement”) Miss Kwong submits that: “Having regard to context and purposive interpretation, the word “leaving” can only be reasonably understood as a typographical error which could only be taken to mean LY [ie Madam Li] is always “living” in Canada as “leaving” would only make sense if one was leaving “from” and not “leaving in”. In these circumstances, the Petitioner has had direct knowledge and/or notice that LY is not ordinarily resident in Hong Kong.” (Para 24 of B’s Skeleton) 89.Miss Kwong relies on Re To Cho Ping [2012] 1 HKLRD 125 to submit that the Petitioner should have made reasonable enquiries with Mr Yuen on the whereabouts of Madam Li in view of the Statement made in Yuen’s HCMP Affirmation. 90.I agree that it is arguable that the Statement in Yuen’s HCMP Affirmation may mean that Madam Li was always living in Canada. However, Mr Yuen did not say that Madam Li “lives all the times” in Canada but only “always living” in Canada. That means, Madam Li also “lived” somewhere else when she was not living in Canada. This place could only be reasonably understood to be Hong Kong as Madam Li’s husband and companies were in Hong Kong. 91.Taking Madam Li’s case to the highest, the Statement does not necessarily mean that Madam Li was not ordinarily resident in Hong Kong at the material times. In the annual returns of Gold China and Win Time signed by Mr Yuen on 17 November 2016, Mr Yuen reported the Latin Court Address as Madam Li’s address as well as his own address. Mr Yuen as Madam Li’s husband should know the residential address of Madam Li. This shows that Madam Li was living both in Canada and in Hong Kong at the material times. In fact, Madam Li’s family members lived in both Canada and Hong Kong, ie her children were living in Canada but her husband was living in Hong Kong. It is not unusual for families in Hong Kong to have residence both in Hong Kong and in another country. This is reinforced by KYWO acknowledging service of the originating summons in the HCMP Action (the “OS”) for Madam Li on 13 October 2016. The OS was issued on 27 September 2016 and served within jurisdiction to Madam Li in September / October 2016. Furthermore, according to Sin, Mr Yuen had informed him that Madam Li would only stay in Canada occasionally to look after her children there and would come back to Hong Kong to handle her companies in Hong Kong. (See para 5 of Sin’s Affirmation) Madam Li has not adduced any evidence from Mr Yuen to rebut the aforesaid evidence of Sin. 92.The Statement was no more than an ambiguous and vague statement providing no particulars of the address at which Madam Li could be contacted. Reading the Statement in context does not put the Petitioner on actual notice that Madam Li was not ordinarily resident in Hong Kong in June 2017 when the Petitioner attempted service of the SD on her and that reasonable inquiries on the whereabouts of Madam Li ought to be made to Mr Yuen. 93.I have found that Madam Li has failed to prove that she ceased to be ordinarily resident in Hong Kong. As Madam Li remained ordinarily resident in Hong Kong at the material times, the steps taken by the Petitioner in attempting personal service of the SD to Madam Li in accordance with the guidance set out in PD 3.1 were reasonable steps that should be taken by a creditor to discharge its obligation under rule 46(2) of the Rules in respect of service of a statutory demand. Madam Li also fails on the Service Ground. The Challenge to the Consent Order and Guarantees Ground 94.Miss Kwong contends that the Consent Order giving rise to the petitioning debt is liable to be set aside. She contends that the Consent Order was entered without express consent of Madam Li (see para 3 of B’s Skeleton) or that the consent was obtained by misrepresentation and/or fraud. She further contends that the Guarantees giving rise to Madam Li’s liabilities to the Petitioner were executed by Madam Li under duress, undue influence and/or misrepresentation. The Consent Order 95.Where the debt which forms the basis of a bankruptcy order is a judgment debt, the starting point is that the court will normally not consider any dispute on the debt. (See Re Kam Hung Cheung (supra)) As pointed out by the Court of Appeal in Re Tam Mei Kam (unrep., CACV 87/2012, 8 May 2013) the bankruptcy court would treat a judgment for a sum of money as prima facie evidence that the judgment debtor was indebted to the judgment creditor for that sum. The Court of Appeal further pointed out that if the judgment concerned was a judgment obtained after a full trial on the merits, the general principle was that the bankruptcy court would inquire into such a judgment only if the judgment debtor could show fraud, collusion or miscarriage of justice. (See paras 22.1 and 26.2 of the judgment) 96.Although the Consent Order was not one made after a full trial, it was made under consent of the parties when all parties were legally represented in the HCMP Action. As pointed out by Ng J in Re Chow Yuen Chuen (unrep., HCB 6004/2015, 20 July 2016) that:
97.I am of the view that for Madam Li to set aside or overturn the Consent Order, she has to adduce cogent prima facie evidence to show fraud, collusion or miscarriage of justice. 98.The Court of Appeal further pointed out in Re Tam Mei Kam (supra) that the rationale for the court “going behind” a judgment is to protect a debtor’s real creditors from collusive judgments entered into by the debtor in order to initiate a bankruptcy and thereby reduce the funds available for his real creditors. The reason why a bankruptcy court is not conclusively bound by a judgment debt is so that (in appropriate circumstances) it can inquire whether there was actually bona fide consideration for it. (See paras 22.2 to 23 of the judgment) There is no suggestion that the debt due from Madam Li to the Petitioner lacked consideration or that the Consent Order was a “collusive judgment”. Knowledge to the HCMP Action and the Consent Order 99.Miss Kwong contends that Madam Li could not have been aware of the HCMP Action and the OS could not have been validly served on Madam Li as Madam Li had left Hong Kong for Canada since 2014. 100.As discussed above, Madam Li might or might not have gone to Canada in 2014. Even if the bare assertion of Madam Li is accepted, her case is that she went to Canada on 30 April 2014 but came back to Hong Kong occasionally thereafter (ie in March 2015 and after January 2016). The OS was issued on 27 September 2016 and served to Madam Li within jurisdiction. KYWO filed acknowledgment of service of the OS for Madam Li on 13 October 2016. No issue had been taken in the HCMP Action on the OS not being validly served on Madam Li. Miss Kwong’s submissions that “any substituted service order in respect of the OS does not and cannot constitute good service” (para 50 of B’s Skeleton) are misconceived as no substituted service order in respect of the OS had been applied for by the Petitioner or made by the court in the HCMP Action. 101.In Li’s 1st Affirmation, Madam Li stated that:
102.However, in Li’s 2nd Affirmation, Madam Li told a different story as follows:
103.Contrary to what Madam Li stated in Li’s 1st Affirmation, it can be seen from Li’s 2nd Affirmation that Madam Li had actual notice and was fully aware of the HCMP Action. KYWO advised the Trustees that KYWO took instructions on the HCMP Action from Mr Yuen pursuant to the Power of Attorney executed by Madam Li on 24 April 2015 (pp 1776 and 2650). Furthermore, Madam Li was in actual contact with KYWO, who represented her in the HCMP Action, by phone and by email. Madam Li had been expressly advised by KYWO that she needed to be represented by lawyers in the HCMP Action but she decided to authorize Mr Yuen to deal with the HCMP Action for her. 104.The Court of Appeal after explaining the rationale for the bankruptcy court to “go behind” a judgment in Re Tam Mei Kam (supra) remarked in para 23 of the judgment that:
105.It is wholly without merits for Madam Li now to seek to contend that she had no knowledge of the HCMP Action or that the Consent Order was entered against her without her express consent or that she had not authorized Mr Yuen to deal with the HCMP Action for her. Duress / undue influence / misrepresentation / fraud 106.Miss Kwong’s contends that “if one tests the entering of judgment and/or order in HCMP 2586/2016 against background of dealings between [Madam Li] and [Mr Yuen], there exists an arguable case of duress, undue influence, misrepresentation and/or fraud.” (See para 53 of B’s Skeleton) 107.Doing my best to decipher Madam Li’s contentions in respect of duress, undue influence, misrepresentation and/or fraud, it seems that Madam Li is relying on the following matters:
Duress 108.“Duress of the person may consist in violence to the person, or threats of violence, or in imprisonment whether actual or threatened.” (Para 8-012 of Chitty on Contract Vol 1 (33rd ed) (2018)) 109.The matters raised by Madam Li do not amount to duress of person. In para 10 of Li’s 1st Affirmation, Madam Li alleged that:
110.No particulars have been provided in respect of the aforesaid alleged incidents. They at most show that Mr Yuen is a person with bad temper. There was no violence or threat of violence to Madam Li. What Madam Li tried to avoid was the bad temper of Mr Yuen. I find that Madam Li fails to prove on balance of probabilities that she signed the Guarantees under duress of Mr Yuen. 111.Even if Madam Li signed the Guarantees under duress of Mr Yuen, it was not duress from the Petitioner, the contractual counter-part of the Guarantees. As stated in para 8-053 of Chitty on Contract Vol 1 (above):
112.No evidence has been adduced by Madam Li to prove that the Petitioner knew the alleged duress or had constructive notice of it or had procured the signing of the Guarantees by Madam Li through the agency of Mr Yuen. Both Sin’s Affirmation and Tang’s Affidavit denied that the Petitioner had knowledge of the dealings between Mr Yuen and Madam Li. Madam Li in her replying affirmation (ie Li’s 2nd Affirmation) adduced no evidence to rebut the aforesaid evidence of Sin and Tang. The alleged duress (not accepted as being proved) even if proved does not assist Madam Li in seeking to set aside or overturn the Consent Order or to render the Guarantees unenforceable. Undue influence 113.In Royal Bank of Scotland v Etridge (no 2) [1998] 4 All ER 705 Stuart‑Smith LJ said in the English Court of Appeal at 711f‑j that:
114.When the case went to the House of Lords [2002] 2 AC 773, Lord Scott had reservation on the utility of the Class 2B classification. His Lordship stated in para 161 of the House of Lords judgment that:
115.To rely on the defence of undue influence, Madam Li has to either prove actual undue influence (Class 1) or adduce evidence of her relationship with Mr Yuen together with other available evidence to justify a finding of undue influence on the balance of probabilities (Class 2). 116.In Bank of China (Hong Kong) Limited v Chan Fook Wing and Another (unrep, HCMP 420/2004, 25 September 2015) To J pointed out that:
117.The facts alleged by Madam Li (see para 107 above) were far from evidence sufficient to establish actual undue influence. As pointed out above, they were at most attempts by Madam Li to avoid the bad temper of Mr Yuen. In the words of DHCJ Poon (as he then was) in Bank of China (HK) Ltd v Wong Yuk Ping & Anor [2003] 1 HKLRD 1 at 17J: “Actual undue influence is an equitable wrong committed by the dominant party against the other which makes it unconscionable for the dominant party to enforce his legal right against the other. It is typically some express conduct overbearing the other party’s will.” The facts alleged by Madam Li did not support a plea of express undue influence. 118.The relationship of husband and wife does not fall within any of the special classes in which the law will presume a relationship of trust and confidence. When the Etridge case went to the House of Lords, their Lordship emphasised that the courts should not be too ready to find undue influence as between husband and wife. Lord Nicholls said at para 32 of the House of Lords judgment that:
119.Lord Scott also said in the House of Lords judgment of the Etridge case (supra) that in the surety wife cases, while there are cases in which the husband abused his wife’s confidence in him, for example by over-estimating his prospects, misrepresenting his intentions or subjecting her to excessive pressure, it should be recognised that undue influence, though a possible explanation for the wife’s agreement to become a surety, is a relatively unlikely one. (See para 160 to 162 of the House of Lords judgment) 120.In the Wong Yuk Ping case HCDJ Poon (as he then was) expressed the following view at 17A‑C that:
121.Mr Recorder Ma SC (as he then was) pointed out in Bank of China (Hong Kong) Ltd v Wong King Sing & Ors [2002] 1 HKLRD 358 at 370D‑G that:
122.In Li Sau Ying v Bank of China (Hong Kong) Ltd [2005] 1 HKLRD 106, Lord Scott NPJ stated at 121A‑C that:
123.The burden rested on the complainant to show that the evidence justifies a conclusion that the impugned transaction was brought about by undue influence. As pointed out by Mr Recorder Anthony Houghton SC in Citibank, N.A. v York Star Company Limited and Others (unrep., HCA 526/2016, 9 March 2017) that:
124.Madam Li tried to paint a picture that she was a new immigrant housewife lived a life of subservience to the wishes or commands of Mr Yuen. However, information provided by Madam Li in her affirmations does not project such image. 125.In Li’s 1st Affirmation, Madam Li stated that after she finished high school, she studied nursing (醫士護理專業) for three years at 新疆衛生職業中專and then studied foreign trade (外貿) at 新疆成人教育學院 for two years. As such, she is well-educated. 126.She worked in Xinjiang from 1995 to 1997 as administrative assistant of the general manager office (總經理辦公室主任行政助理) at a hotel. She then moved to Shenzhen in 1997 and worked at various Taiwan invested factories as sales coordinator (業務跟單) or to manage sales department (業務部管理工作). In 1999, she changed to work for a Hong Kong invested company as chain-stores district sales management (連鎖店區域銷售管理). She started her own import/export customs clearing business (進出口貨物報關公司) in 2001 in Shenzhen and met Mr Yuen in 2002 over business. In 2003, she started to assist Mr Yuen to develop sale of sewing machine business in China. She was responsible for customer development and after-sale services (客戶廠家及行家客戶開發、售後服務) in China. In 2011, she assisted Mr Yuen and his partners to establish a company called 永昌盛國際公司 with office in Shenzhen. She was responsible for purchasing, human resources and company expenditures (物料採購，人事及日常支出) of the company until 2013 when the company’s Shenzhen office was closed. As such, Madam Li is an experienced business woman. She was managing Mr Yuen’s company in Shenzhen. 127.Madam Li is also an independent person. She went to work in Shenzhen from Xinjiang in 1997 at the age of 25. She set up her own business in Shenzhen in 2001, ie about 4 years after coming to Shenzhen. She gave birth to a child for Mr Yuen in 2004 without getting married. She applied for migration to Canada with her daughter in 2005 (before marrying Mr Yuen and not including Mr Yuen in the application). It was Mr Yuen who later requested Madam Li to include him in the migration application. They then married in 2009. According to Madam Li, she moved to live in Canada with her children since 2014 without Mr Yuen and they had had less contact since then. Madam Li described her personality as straight and logical (率直和講條理) (see para 16 of Li’s 1st Affirmation). She would not be shied of expressing her views on business matters to Sin whom Madam Li said that she had only met for a few times. (See para 28 of Li’s 1st Affirmation and paras 7 and 8 of Li’s 2nd Affirmation.) 128.Madam Li’s bare assertion in her affirmations of her subservience to the commands of Mr Yuen does not tally with her independent personality. In view of the above, Miss Kwong’s description of Madam Li as “a domestic and obedient wife who was willing and simply following her Husband’s commands and instructions” (see para 31 of B’s Skeleton) is far from an accurate description of Madam Li’s personality. 129.Madam Li also tried to portray herself as a mere nominee of Mr Yuen in respect of the affairs of Gold China and Win Time. In fact, Madam Li had been a director of Gold China since 13 January 2003 and a director of Win Time since 25 August 2003. This was the time when Madam Li said that she was assisting Mr Yuen to develop sewing machine sale business in China. In para 14 of Li’s 1st Affirmation, Madam Li stated that: “2003年全面協助袁先生開拓大陸衣車銷售市場，負責大陸客戶廠家及行家客戶開發，售後服務。” At that time, Madam Li in fact was the majority shareholder of Gold China holding 99.99% of the issued capital of Gold China. As such, in 2003 she was not assisting Mr Yuen but developing the business of her own company (Gold China). 130.Madam Li did not merely sign the Guarantees securing the indebtedness of Gold China to the Petitioner. She had also executed as a director of Gold China or Win Time various corporate documents filed with the Companies Registry and bank documents relating to credit facilities granted by the Petitioner to Gold China. Tang listed out 70 such documents in para 9 of Tang’s affidavit. These had not included other internal corporate documents and documents relating to credit facilities granted by other creditors to Gold China and/or Win Time which might also have been signed by Madam Li. I do not propose to list out all the documents referred to in Tang’s Affidavit. Suffice for me to say that the number and nature of documents signed by Madam Li for Gold China and Win Time went far beyond documents which a nominee would be expected to sign. Madam Li not only signed banking documents for Gold China and Win Time with the Petitioner. She also signed banking documents for Gold China and Win Time with other banks including The Hongkong and Shanghai Banking Corporation (“HSBC”) (pp 258 to 334, 451 to 457, 597 to 689), China Citi Bank International Limited (pp 427 to 450), and Bank SinoPac Hong Kong Branch (“Bank SinoPac”) (pp 1698 to 1707). 131.Miss Kwong submits that the documents may appear to bear the signature of Madam Li but the Petitioner has not adduced evidence to prove that those documents were actually signed by Madam Li. In para 21 of Li’s 2nd Affirmation, Madam Li alleged that signature on the following eight documents were not signed by her:
132.I note that the signing of the Charge Over Securities and Deposits in favour of HSBC by Madam Li was witnessed by an officer of HSBC with the name “Y H Sin”. Madam Li is accusing fraud against that officer of HSBC. This is a serious but bare accusation to which I shall not make any finding without hearing evidence. Furthermore, I see no reason why someone would forge the signature of Madam Li to file annual returns for Gold China and Win Time. Madam Li provides no explanation for the alleged forgery signatures. 133.In any event, taking Madam Li’s case to the highest and assuming that all the aforesaid eight documents were not signed by Madam Li, there are still more than 60 corporate documents or bank documents relating to Gold China and Win Time signed by Madam Li for these companies. As Miss Kwong rightly pointed out, Madam Li had admitted in para 10 of Li’s 2nd Affirmation that she did sign some corporate as well as bank documents. 134.Miss Kwong submits that the shareholding as set out in the company documents simply set out the legal position when in fact, the real and equitable shareholder is Mr Yuen. (Para 28 of B’s Skeleton) This is a bold submission without supporting evidence. It is not Madam Li’s case that she holds the shares in Gold China and Win Time as trustee for Mr Yuen. Nowhere in her affirmations did she make such assertion. 135.This is not a case where Mr Yuen could not have conducted the operations of Gold China or Win Time or held their shares in his own name and had to control the companies behind the scenes through a nominee. In fact, Mr Yuen had become a shareholder and director of Gold China between 22 October 2014 and 22 October 2015 (probably on about 22 April 2015 when 5,300,000 shares in Gold China were allotted to him). (See para 11 above) Mr Yuen also became a shareholder and director of Win Time in early May 2014. (See paras 16 and 18 above) If for some unknown reasons Mr Yuen needed a nominee to hold shares and directorship in Gold China (prior to April 2015) and Win Time (prior to May 2014) for him, he would have required Madam Li to transfer back the shares to him after he himself had become shareholder of these companies. In fact, if Mr Yuen wished to get back control of the companies from his nominee, he would have required his nominee to transfer the shares back to him instead of causing the companies to allot new shares to him. 136.No declaration of trust has been produced and no explanation has been provided for why Mr Yuen would require a nominee to hold shares in Gold China and Win Time for him. There is also no explanation for Mr Yuen to require Madam Li to continue holding substantial shareholding in Gold China for him when Mr Yuen himself was already a shareholder of Gold China from April 2015 onwards. I reject Miss Kwong’s aforesaid unsubstantiated submissions. 137.Madam Li alleged that she was not allowed to be involved in the affairs of the companies and did not even have a working desk in the companies. She said that she did not have any actual power in the companies. However, in para 33 of Li’s 1st Affirmation, Madam Li admitted that Mr Yuen required authorization or power-of-attorney from her to deal with corporate affairs of the companies, in her words: “處理公司的物業買賣、公司文件及支票方面等一般性公司事務”. In fact, Madam Li was one of the authorized signatories to operate the credit facilities granted by the Petitioner to Gold China in 2014. Madam Li signed the Petitioner’s facility letters dated 16 May 2013 (pp 335 to 343), 5 February 2014 (pp 396 to 405) and 8 May 2014 (pp 409 to 423) as the authorized signatory of Gold China. The investigation of the Trustees showed that Madam Li was also one of the authorized signatories of Gold China’s bank account held with CTBC Bank Co Ltd (“CTBC”) from 29 August 2012 to 28 February 2018. (See para 25 of the Trustee’s Affirmation) CTBC submitted proof of debt for the sums of HK$327,720.00 and US$162,725.06. The above show that Madam Li did have management control of the companies. 138.It is also noted that Madam Li was in contact with Ms Yoyo Chan, the former staff in charge of the financial matters of the companies, even after Ms Chan had left the companies and that Ms Chan would provide Madam Li with the financial information requested. (See para 36 of Li’s 1st Affirmation and paras 12 and 15 of Li’s 2nd Affirmation) As such, Madam Li had access to at least the financial information of Gold China and Win Time. If Madam Li had not been involved in the affairs of the companies, she would not have known staff of the companies, not to say maintaining contact after the staff had left the companies. This suggests that Madam Li did have significant involvement at least in the financial matters of Gold China and Win Time. 139.Madam Li also alleged that Mr Yuen would not explain the contents of documents required to be signed by her and would get angry at her if she asked about that. In para 10 of Li’s 2nd Affirmation, Madam Li stated that: “每當我向袁先生問及公司業務或問他給我甚麼文件簽時，袁先生只會不耐煩的叫我只管好孩子就可以了，其它的不用我多管。” She said that she dared not to ask. However, Madam Li stated later in the same paragraph that: “每當我問他關於公司的事，他都說他可以搞定。” In fact, in para 30 of Li’s 1st Affirmation, Madam Li had said that: “基於對袁先生的信任，我並無追問下去。” If Madam Li signed the Guarantees without paying attention to the contents of the documents, this was not because she signed the documents under undue influence of Mr Yuen but because she trusted Mr Yuen. The fact that she trusted Mr Yuen did not per se constitute Mr Yuen having undue influence on her. As Lord Nicholls stated in the House of Lords judgment in the Etridge case (supra):
140.Furthermore, it is Madam Li’s case that since she moved to Canada in April 2014, she had less contact with Mr Yuen. If Madam Li was under undue influence of Mr Yuen prior to April 2014, such undue influence ceased to affect her after April 2014. It is noted that the 2014 Guarantee was executed on 25 July 2014 when, even in Madam Li’s own case, she was no longer under undue influence of Mr Yuen. 141.Miss Kwong refers to Bank of China (Hong Kong) Limited v Well Lok Printing Limited and Others [2008] 1 HKC 416, CACV 386/2006, 23 January 2008 to submit that Madam Li’s case is also a case where an inference of undue influence can properly be drawn. In the Well Lok Printing Limited case, the wife together with the husband mortgaged their jointly owned property to the bank to secure the husband’s borrowing. The wife in that case was a person of limited education. She did not complete her primary education and was unable to read English documents. She had always been a menial worker earning no more than $4,000 - $5,000 per month. The Court of Appeal held that the circumstances of the case viewed as a whole, including the particular cultural background of the wife, were such that, unlike ordinary cases, a presumption of undue influence arose. 142.However, in the case before me, Madam Li is a well-educated experienced business woman. She was guaranteeing the borrowings of Gold China in which she was the majority shareholder at the material times. The Court of Appeal has pointed out in para 14 of the judgment of the Well Lok Printing Limited case (supra) that:
143.Madam Li did not stand as surety for Mr Yuen or Mr Yuen’s companies, she stood as surety for her own company. I do not see how such transaction can fall within “transaction could not be readily explicable by the relationship of the parties”. The Well Lok Printing Limited case (supra) does not assist Madam Li. 144.The matters alleged by Madam Li even if accepted do not establish a relationship between Mr Yuen and Madam Li whereby Mr Yuen had acquired over Madam Li a measure of influence or ascendancy of which Mr Yuen then took unfair advantage. 145.Furthermore, as pointed out by Warren J in Fladgate Fielder v Smith [2005] All ER (D) 264 (May), to raise the presumption of undue influence in such case it was necessary to establish two prerequisites, namely a relationship of trust and confidence between the parties and that the transaction called for an explanation. Ordinary, unexceptional transactions of everyday occurrence would not be caught. 146.The credit facilities granted by the Petitioner to Gold China included: overdraft, installment loans, term loan, trading finance (ie letter of credit, cargo receipt, and trust receipt), account payable financing, and negotiation under documentary credit with discrepancies. (See pp 335 to 343, 396 to 405 and 409 to 423) These are ordinary credit facilities for a trading company. A guarantee executed by a majority shareholder of a company to secure such borrowing of his/her company is ordinary unexceptional transaction of everyday occurrence. 147.I find that Madam Li has failed to prove on balance of probabilities that she executed the Guarantees under undue influence. 148.Madam Li stated her case against the Petitioner in para 37 of Li’s 1st Affirmation as follows:
149.This is a case when the alleged undue influence did not come from the Petitioner (the plaintiff) but from Mr Yuen, a co‑defendant. “Where one party seeks to avoid a contract on the ground of undue influence by a third person, it must appear either that the third person was acting as the other party’s agent, or that the other party had actual or constructive notice of the undue influence.” (para 8-110 of Chitty on Contracts Vol 1 (above)) 150.In the case of a wife guaranteeing the obligation of a husband, Lord Hobhouse put the following questions to be answered by the court in the Etridge case (supra) in para 101 of the House of Lords judgment:
151.His Lordship further pointed out that unless the first question was answered in favour of the wife neither of the later questions arise. In this case, whether the Petitioner was put on inquiry becomes a non-issue as Madam Li has failed to prove the de facto existence of a relationship of trust and confidence in Mr Yuen exceeding the reciprocal trust and confidence being a natural and admirable consequence of the relationship of a mutually loyal married couple (in the words used by Lord Scott in the Etridge case (supra) in para 159 of the House of Lords judgment). Furthermore, this is not a case where the wife guaranteeing the obligation of her husband. It is a case where the wife guaranteeing the obligation of a company which was basically wholly owned by her at the dates of execution of the Guarantees. 152.At the material times, Madam Li was not only a director but also the majority shareholder of Gold China. It would only be natural and reasonable for her to guarantee borrowings of Gold China from the Petitioner. There was nothing out of “ordinary”. The following observation of Anthony Chan J made in Bank of China (Hong Kong) Ltd v Leigh Hardwick (Unrep, HCA 1110/2006, 28 August 2013) are also applicable to the case before me:
153.In this case, the credit facilities granted to Gold China were normal business transaction in the interest of the company. The Petitioner would not be put on enquiry as to any misrepresentation or undue influence of Mr Yuen or requirement of independent legal advice for Madam Li when Madam Li was the majority shareholder of Gold China as at 5 March 2010 and 25 July 2014 when the Guarantees were executed (see paras 10 to 11 above). In fact, in two identical single page bilingual documents called “Confirmation and Acknowledgement” dated the same dates of the Guarantees, it was expressly stated, inter alia, in Chinese that: “本人進一步確認及承認，貴行 (ie the Petitioner) 已建議本人就抵押文件尋求獨立的法律意見” (pp 727 and 729). As such, I see no merits in Madam Li’s contention that the Petitioner had failed to discharge its duties towards her to ensure that she had independent legal advice before signing the Guarantees. 154.In Barclays Bank Plc v O’Brien [1994] 1 AC 180 at 196, the English House of Lords pointed out that there is a substantial risk that the wife may act as surety when the transaction is not to her advantage because of some legal or equitable wrong by the husband. Where the creditor is aware that the debtor and the surety are husband and wife, and the transaction is on its face not to the financial advantage of the surety as well as of the debtor, the creditor will be fixed with constructive notice of any undue influence, misrepresentation or other legal wrong by the debtor unless it has taken reasonable steps to satisfy itself that the surety has entered into the obligation freely and with knowledge of the true facts. 155.According to the O’Brien case (supra), to fix a creditor with constructive notice of undue influence, misrepresentation or other legal wrong by the husband so as to render the surety of a wife in favour of the creditor unenforceable, the following requirements have to be fulfilled:
156.In the Etridge case (supra), the English House of Lords applied a similar approach wherever the relationship between the surety and the debtor is non-commercial. 157.In the case before me, none of the above requirements has been met. The surety (Madam Li) was the director and majority shareholder of the debtor (Gold China) when the Guarantees were executed, ie on about 5 March 2010 and 25 July 2014. The relationship between Madam Li and Gold China was a “commercial” relationship. Although the surety is the wife (Madam Li) of Mr Yuen, the debtor (Gold China) is not the husband (Mr Yuen). The debtor (Gold China) was not even a company of the husband but a company of the wife at the material times. Obtaining credit facilities for the wife’s company (Gold China) was on its face to the financial advantage of the wife. As pointed out in para 146 above, the credit facilities granted by the Petitioner to Gold China and guaranteed by Madam Li were ordinary commercial banking facilities. They were not transactions involving “substantial risk”. In such case, the Petitioner would not be fixed with constructive notice of undue influence, misrepresentation or other legal wrong (if any) committed by the husband. Madam Li’s claim that the Petitioner had the legal obligation to explain to her and to ensure that she understood the contents of the Guarantee lacks legal foundation. 158.Miss Kwong submits that this was an unusual situation to the Petitioner in that the Petitioner was being presented by Mr Yuen with documents already signed and executed by Madam Li, the multitude of legal documents signed by Madam Li and the legal effects thereof, and Madam Li almost invariably being absent when the signed documents were presented to the Petitioner. She submits that the Petitioner ought to and should have been aware of the need to ensure Madam Li has had legal advice independent of Mr Yuen. 159.Sin pointed out in para 9 of Sin’s Affirmation that: “the Guarantees and Indemnity dated 5 March 2010 was signed by Mr Yuen and [Madam] Li jointly and severally in the presence of Mr Steven Chan, the Relationship Manager of the Petitioner and the Guarantee and Indemnity dated 25 July 2014 was signed by Mr Yuen and [Madam] Li jointly and severally in the presence of Mr Man Hoi Ming, Brian, the Relationship Manager of the Petitioner.” The same was referred to in paras 8(a) and (b) of Tang’s Affidavit. Madam Li in her replying affirmation (ie Li’s 2nd Affirmation) did not dispute the aforesaid evidence of Sin and Tang but only asserted that the Petitioner’s officers had not explained to her the contents of the documents signed by her. Miss Kwong’s aforesaid contention of “unusual situation” was not supported by evidence. 160.Both Sin’s Affirmation and Tang’s Affidavit denied that the Petitioner had knowledge of the dealings between Mr Yuen and Madam Li and of the alleged misrepresentation made by Mr Yuen to Madam Li. The evidence adduced by Madam Li does not show that Mr Yuen was acting as the Petitioner’s agent or that the Petitioner had actual or constructive notice of the alleged undue influence (if any). Mr Yuen was not the debtor but a co-guarantor. Madam Li was not guaranteeing debts of her husband, Mr Yuen. She was guaranteeing debts of her own company, Gold China. The transaction was to the financial advantage of Madam Li’s company, so as to Madam Li. The alleged undue influence (not accepted as being proved) even if proved does not assist Madam Li in seeking to set aside or overturn the Consent Order or to render the Guarantees unenforceable. 161.I do not see that Madam Li has shown an arguable case that she executed the Guarantees as a result of actual or presumed undue influence. This is also not a case where the Petitioner is legally required to take reasonable steps to satisfy itself that Madam Li had brought home to her the practical implications of entering into the Guarantees or where the Petitioner would be fixed with notice (whether actual or constructive) of any undue influence which Mr Yuen might have on Madam Li. Misrepresentation 162.Miss Kwong put the case of Madam Li in para 58 of B’s Skeleton as follows:
163.It is noted that no evidence has been adduced from Mr Yuen in respect of the alleged misrepresentation. They were no more than bare assertions from Madam Li. Putting Madam Li’s case to the highest, the alleged misrepresentation (if any) was made by Mr Yuen. Both Sin’s Affirmation and Tang’s Affidavit denied that the Petitioner had knowledge on alleged misrepresentation made by Mr Yuen to Madam Li. There is no evidence to show that the Petitioner had actual or constructive notice of the alleged misrepresentation or that Mr Yuen was making the alleged misrepresentation as the Petitioner’s agent. 164.Para 7-025 of Chitty on Contracts Vol 1 (supra) states that:
165.The alleged misrepresentation even if proved does not affect the Consent Order. The same applies to the alleged misrepresentation relating to signing of the Guarantees by Madam Li. Fraud 166.I have dealt with the knowledge of Madam Li in respect of the HCMP Action and the authorization of Mr Yuen to handle the HCMP Action for Madam Li in paras 99 to 105 above. Madam Li’s allegation of fraud relying on having no knowledge of the HCMP Action or not having authorized Mr Yuen to handle the HCMP Action for her simply has no merits. 167.Madam Li made an unparticularized statement in para 32 of Li’s 1st Affirmation that: “袁生讓我簽文件時，我並未見到有見證人”. 168.According to documents produced to the court, Madam Li signed the Guarantees in the presence of the relationship managers of the Petitioner (pp 1 to 6 and 9 to 16). Such facts were confirmed in Sin’s Affirmation and Tang’s Affirmation. They were not disputed by Madam Li. (See para 159 above) Most important of all, Madam Li never disputes that she signed the Guarantees. 169.If Madam Li seeks to allege fraud to avoid liabilities under the Guarantees, she is bound to fail. 170.From evidence adduced by Madam Li in her affirmations on events leading to granting of the Consent Order, it is not Madam Li’s case that the Consent Order was resulted from duress, undue influence, misrepresentation and/or fraud committed by the Petitioner or with the knowledge of the Petitioner. Furthermore, it is the case of Madam Li that she had direct contact with lawyers of KYWO without hindrance from Mr Yuen. (See para 14 of Li’s 2nd Affirmation) She might obtain information on the HCMP Action directly from KYWO and seek advice from them directly on the same. Madam Li simply has no basis to assert “duress, undue influence, misrepresentation and/or fraud” in respect of the granting of the Consent Order. 171.Alleging duress, undue influence, misrepresentation and fraud committed by Mr Yuen against Madam Li does not assist Madam Li in seeking to set aside or overturn the Consent Order. 172.Miss Kwong contends that: “The bankruptcy order bears the hallmark of one being premised upon an underlying judgment obtained by duress, undue influence, misrepresentation and/or fraud by [Madam Li’s] Husband and as such, should be annulled.” (See para 64 of B’s Skeleton”) For reasons set out above, I do not see that Madam Li has an arguable case to set aside or overturn the Consent Order (in favour of the Petitioner being the plaintiff in the HCMP Action) relying on the ground of alleging duress, undue influence, misrepresentation and/or fraud on the part of Mr Yuen, a co-defendant in the HCMP Action. Non est factum 173.When Madam Li complained of documents signed by her not being explained to her and of not knowing that she was signing guarantees (para 31 of Li’s 1st Affirmation and para 9 of Li’s 2nd Affirmation), it seems that she also raised the plea of non est factum. 174.In Ming Shiu Cheung & Ors v Ming Shiu Sum & Ors (2006) 9 HKCFAR 334 the Court of Final Appeal held that:
175.Litton NPJ said in Bank of China (Hong Kong) Ltd v Fung Chin Kan & Another (2002) 5 HKCFAR 515 at 533 that:
176.As pointed out by Ng J in Re Leung Lai Hing Cindy (unrep, HCB 6777/2015, 3 April 2017) that:
177.Madam Li alleged that she was not familiar with English (不諳英文). However, Tang pointed out in para 11 of Tang’s Affidavit that Madam Li had signed numerous documents which were in English only without any interpretation clause. These documents include credit facilities and security documents signed over a period of 6 years (ie from September 2009 to October 2015) (See exhibit “TLS-1” to Tang’s Affidavit). 178.Tang further pointed out in para 13 of Tang’s Affirmation that some security documents signed by Madam Li were in fact bilingual. These bilingual documents including “Notice (to individual third party security provider)” dated 5 March 2010 and 25 July 2014 which contained, amongst others, express warning / confirmation as to the nature, purpose and effect of the Guarantees. In two identical copies of bilingual “Confirmation and Acknowledgement” dated the same dates of the Guarantees (pp 726 to 729), Madam Li’s signatures appeared immediately above the words “Security provider” with the Chinese translation “擔保人” expressly printed thereon. Even without knowledge of English, Madam Li would have no difficulties to know that she was signing documents as a guarantor. 179.According to Madam Li’s affirmation, she knew that she was signing banking documents. She had been told by Mr Yuen that if the facilities were not used, no interest would be payable (para 30 of Li’s 1st Affirmation). As such, she knew that the documents were related to credit facilities. She signed documents immediately above the words “Security provider” “擔保人”. She certain knew that she was signing some security documents providing guarantee to the Petitioner in respect of credit facilities. 180.Madam Li alleged that she was misled by Mr Yuen to think that the documents signed by her were ordinary bank documents and she did not ask further as she trusted Mr Yuen. (Para 30 of Li’s 1st Affirmation) Lord Reid had remarked in Saunders v Anglia Building Society (supra) at 1016 C-D that in cases involving documents signed by a person of full capacity, in general he would not be heard to say that he signed in reliance on someone he trusted. Madam Li signed above the Chinese words “擔保人” and yet did not bother to read the documents. As Lord Pearson stated in Saunders v Anglia Building Society (supra) at 1035G:
181.In Re Leung Lai Hing Cindy (supra) where the debtor had signed documents in Portuguese, but alleged that she did not read or understand that language, Ng J was “of the firm view that for a person of full age and understanding to sign documents in a foreign language which he does not understand on numerous occasions over a period of almost 5 years, without asking for a translation or explanation of its nature and contents, amounts to carelessness.” (Para 18 of the judgment) In the case before me, Madam Li had signed English documents on numerous occasion over a period of more than 6 years. If she had incurred any liabilities unknown to her in such circumstances, she only has herself to blame. 182.If Madam Li seeks to invoke the principle of non est factum, she fails. 183.Madam Li also fails on the Challenge to the Consent Order and Guarantees Ground. Discretion of the court 184.If the court does not think that ground(s) for annulling a bankruptcy order existed, it cannot invoke section 33(1)(a) of the Ordinance to annul the bankruptcy order. (See the Chung Sun Kwan case (supra)) Even if Madam Li has proved ground(s) for annulling the Bankruptcy Order, the court still has discretion not to annul the same after considering the interests of the creditor, the debtor and the public bearing in mind that a bankruptcy order is to be annulled only under exceptional circumstances. (See the Kam Hung Cheung case (supra)). 185.Madam Li has failed to prove that there are ground(s) to annul the Bankruptcy Order, the Application can be dispose of on that basis. For the sake of completeness, I shall briefly deal with the situation in the event that I were wrong in holding that Madam Li has failed to show such ground(s). In that situation and in the exercise of my discretion, I shall still refuse to annul the Bankruptcy Order. 186.Tang pointed out in para 25 of Tang’s Affidavit that Madam Li had also been sued by three other banks in HCA 858/2016, HCA 1733/2016 and HCA 1181/2017 for the total sums of HK$14,210,940.69 and US$9,942,201.80. Gold China and Mr Yuen were also defendants to the two 2016 actions and Win Time and Mr Yuen were also defendants to the 2017 action. 187.The Trustees’ investigation showed that Madam Li had been sued by six banks (including the Petitioner) in 2016 and 2017. Particulars of the other five legal proceedings are as follows (paras 32 to 47 of the Trustee’s Affirmation):
188.Other than the Consent Order, judgments had been granted against Madam Li in HCA 1733/2016 in favour of CTBC for the sum of US$164,800.03 together with further interest and costs (pp 1772 to 1774) (summary judgment) and HCA 858/2016 in favour of Ta Chong Bank Limited for the claimed amount together with further interest and costs (pp 2097 to 2098) (judgment in default of defence). Excluding the sums due under the Consent Order, the sums of US$3,926,388.62 together with further interest and HK$221,045.00 as costs were adjudged due from Madam Li to these two other creditors under the aforesaid judgments. It is noted that Madam Li had applied to set aside the default judgment in HCA 858/2016 and such application was stayed upon granting of the Bankruptcy Order (see para 45 of the Trustee’s Affirmation). 189.According to the information provided by the Trustees, as at 10 September 2019 the Trustees had received four proofs of debt (including that of the Petitioner but not including that of the claimant of HCA 858/206 who had not yet submitted its proof of debt) for the total sums of HK$85,352,868.34 and US$882,596.29. However, up to September 2019, the Trustees could only realize HK$1,366,426.91 for Madam Li’s estate. 190.The Trustees’ investigation also finds a property in Canada jointly owned by Madam Li and Mr Yuen. However, the Canadian property is subjected to two legal charges. The first legal charge is in favour of HSBC Bank Canada for CAD1,251,800.00 and the second legal charge is in favour of a Li Yin for CAD1,350,000.00. No information has been provided by the Trustees as to whether there are any equities left in the Canadian property although it is noted that the Trustees took issue on the validity of the second legal charge which was created after the commencement of Madam Li’s bankruptcy. (See para 14 of the Trustee’s Affirmation) 191.Madam Li has adduced no evidence to show that she has the financial abilities to pay off her substantial indebtedness to her other creditors. Other creditors have already taken legal actions against Madam Li. If the Bankruptcy Order is annulled, other creditors will certainly pursue their claims against Madam Li. If Madam Li is unable to answer her liabilities to her creditors, it is likely that a bankruptcy order against Madam Li is inevitable. 192.In the Kam Hung Cheung case (supra), the Court of Appeal stated in para 37 of the judgment that:
193.In the circumstances of this case, there is no point for this court to annul the Bankruptcy Order only to have another creditor petitioning for Madam Li’s bankruptcy again to have her estate administered through bankruptcy proceedings. Other matters 194.Miss Kwong submits that: “The Trustees have asked not to appear in respect of [Madam Li’s] present application unless otherwise directed by the Court which is somewhat tantamount to taking a neutral stance. This can be naturally understood as recognizing there to be merits in [Madam Li’s] application. Otherwise, the Trustee would and could have actively supported the Petitioner’s opposition.” (Para 42 of B’s Skeleton) 195.There is no logic in such contention. The Trustees are here to administer the estate of Madam Li if the Bankruptcy Order is maintained. They are not concerned with the disputes between the Petitioner and Madam Li. It is only reasonable and sensible for the Trustees to take a neutral stance in respect of the Application. To construe this as “recognizing there to be merits in Madam Li’s application” is simply groundless. 196.On the other hand, Mr Lok for the Petitioner contends that if there are merits to set aside or overturn the Consent Order, Madam Li should have already taken out the appropriate application. The fact that no such application has been taken out reflects adversely on the merits of such application. Mr Lok refers to Re Tam Mei Kam (supra) when the Court of Appeal remarked that:
197.In Re Tam Mei Kam, the court was referring to hearing of a bankruptcy petition when the bankruptcy order had not been granted and the debtor still had the locus to appeal or apply to set aside the judgment concerned. However, the case before me is an application to annul a bankruptcy order which had already been granted. Pursuant to section 58 of the Ordinance, the property of Madam Li (including things in action) had been vested in the Official Receiver on the making of the Bankruptcy Order and subsequently in the Trustees when the Trustees were appointed. As such, before the Bankruptcy Order is annulled, Madam Li does not have the locus to appeal or take out application to set aside the Consent Order. Of course, she may seek consent from the Trustees for her to appeal or take out the setting aside application. However, this may incur costs and may not be easy as the Trustees may have their concerns including costs exposure. In such case, I shall not draw adverse inference against Madam Li for not taking this course of action. Conclusion and costs 198.For reasons set out above, I dismiss the Application. 199.The Petitioner and the Trustees shall have their costs for the Application. If the costs are to be paid from the estate of Madam Li, it will be the creditors (including the Petitioner) who will bear the costs of the Application. I see no reasons why Madam Li’s creditors shall bear the costs incurred by the Petitioner and the Trustees for this futile application of Madam Li. Such costs shall be borne personally by Madam Li. 200.As such, I make a costs order nisi that the costs of the Petitioner for the Application shall be paid by Madam Li personally to be taxed if not agreed with counsel certificate. Such costs to be paid after the unsecured creditors of Madam Li have been fully repaid or upon the discharge of Madam Li from bankruptcy whichever the earlier. 201.As the costs of the Trustees for the Application are also part of the costs incurred by the Trustees in the administration of Madam Li’s estate, such costs shall initially be paid out from the estate of Madam Li but Madam Li shall reimburse her estate for such costs after all her unsecured creditors have been fully repaid or upon her discharge from bankruptcy whichever the earlier. I make another costs order nisi to such effect. 202.The aforesaid costs order nisi shall become absolute after 14- days from the date of this judgment unless application is received from either party to vary the same.
Miss Claris Kwong instructed by Cheung & Co for the Bankrupt Mr Michael Lok instructed by Wilkinson & Grist for the Petitioner Attendance of the Joint & Several Trustees being excused |
Cases cited in this judgment
Further hearings and rulings under HCB 5271/2017